Overshadowing the jury? High Court requires greater scrutiny of punitive damages.

The U.S. Supreme Court has held that the federal courts of appeal, when reviewing district courts' determinations of whether punitive damages are excessive, should apply a de novo standard. (Cooper Industries, Inc. v. Leatherman Tool Group, Inc., No. 99-2035, 2001 WL 501732 (U.S. May 14, 2001).) Many courts have reviewed these awards only for abuse of discretion.

In this design infringement case, the plaintiff and amici curiae--including ATLA--had argued that appellate courts should not have wide latitude to interfere with jury verdicts. They urged the Court to adopt the more lenient abuse-of-discretion standard.

But Justice John Paul Stevens, writing for the majority, compared punitive damages to criminal sentences. He reasoned that in cases reviewing whether criminal punishments and forfeitures are excessive under the Eighth and Fourteenth Amendments, the Court has traditionally "engaged in an independent examination of the relevant criteria." Since punitive damages serve a similar function, he wrote, review of these awards for excessiveness under the Due Process Clause should also be de novo.

Justice Ruth Bader Ginsburg was the sole dissenter, although Justices Antonin Scalia and Clarence Thomas, in separate concurrences, maintained that nothing in the Constitution limited the size of punitive damage awards.

Robert S. Peck, president of the Center for Constitutional Litigation, noted that "by taking the punitive damages award outside the scope of the Seventh Amendment's right to a jury trial--a reversal of 150 years of precedent--the decision opens the door to applications for additur at both the trial and appellate levels."

He also noted that the Court recognized in the decision that the law under state constitutions may be different, as its guarantee of the right to trial by jury "may still prevent both legislative and appellate court interference with a jury's determination of punitive damages."

In a footnote, the Court also indicated that the jury-trial right would still adhere and require an abuse-of-discretion standard as to specific jury findings relating to punitive damages. It stated that "nothing in our decision today suggests that the Seventh Amendment would permit a court, in reviewing a punitive damages award, to disregard such jury findings."

Peck said the footnote provides a tool to plaintiffs that will minimize the decision's impact. The Court's opinion, he said, "recognizes that when the jury, through a special verdict form or in response to written interrogatories, makes findings of fact that support the punitive damages award, those findings are binding on the appellate court under the Seventh Amendment's right to trial by jury."

The case involved a suit brought under state law by Leatherman Tool Group of Portland, Oregon, claiming that Houston-based Cooper Industries had illegaly copied Leatherman's design of its Pocket Survival Tool. A jury agreed and awarded Leatherman $50,000 in compensatory damages, plus $4.5 million in punitive damages.

The Ninth Circuit Court of Appeals upheld the awards.

Reversing, the Supreme Court said that punitive damages have been described as "quasi-criminal" and operate as "private fines" intended to punish the defendant and deter future wrongdoing. When a jury's assessment of a plaintiff's concrete loss "is essentially a factual determination" leading to a compensatory award, its imposition of punitive damages "is an expression of its moral condemnation," the Court said.

The justices noted that in criminal cases restricting application of the death penalty, life sentences without parole, and forfeitures, they have examined whether the punishments were grossly disproportionate to the offense. In those cases, they have focused on the degree of the defendant's reprehensibility or culpability, the relationship between the penalty and the harm to the victim caused by the defendant's actions, and the sanctions imposed in other cases for comparable conduct.

As in cases involving criminal penalties, the concept of "gross excessiveness" of punitive damages is "fluid" and acquires "more meaningful content through case-by-case application" on appeal, the Court said. It added that de novo appellate review also tends to unify precedent and stabilize the law.